Are "charter universities" the future of state-funded higher ed?

By David Harrison, Stateline Staff Writer
Pew Center of the States
Friday, March 18, 2011

Editor's note: This story has been corrected to reflect the fact that the proposal to split the University of Wisconsin-Milwaukee from the state system came from the governor's budget, not from the university.

On the face of it, the budget proposal that Ohio Governor John Kasich released this week looks like terrible news for state universities. Not only would Kasich’s plan slash higher education spending by 10.5 percent but it also would cap tuition increases at 3.5 percent a year.

So it might come as a surprise that some university presidents received the plan warmly. Within hours, Ohio State University President E. Gordon Gee released a statement praising the governor for “understanding that higher education and our state’s long-term strength are inextricably linked.”

Gee’s optimism rests on another aspect of the governor’s budget. In exchange for the budget cuts, Kasich would give state universities more autonomy in running their day-to-day affairs. Long-term, that could save schools money. “We at Ohio State continue to move aggressively in both advocating for regulatory freedom and reconfiguring and reinventing our institution,” Gee said.

With states mired in their fourth straight year of budget shortfalls, many university presidents around the county seem willing to make deals like the one in Ohio. In states such as Oregon, Louisiana and Wisconsin, flagship universities are inching away from their traditional patrons in the statehouse, accepting lower levels of state funding in exchange for freedom from state regulations.

The result may be a new relationship between states and their public universities. For state leaders, that relationship may wind up being less of a budget drain — but politicians will have less leverage to tell universities what to do and how to do it. For universities, less state funding and oversight is likely to come with higher tuition and more reliance on private-sector funding. At the same time, it will raise questions about the core mission of state universities whose original purpose was to offer an affordable education.

“The holy grail for a lot of flagship institutions is full tuition autonomy,” says Rich Novak, of the Association of Governing Boards, which represents university boards. “When you strip everything away from it, that is basically what these institutions want. And full admission autonomy which means that they can admit more out of state students and get out-of-state tuition.”

More autonomy

This is not the first time Ohio has sought to change how it pays for higher education institutions. In 2009, the state overhauled its funding formula to reward schools for keeping students through to completion. Instead of receiving money for every matriculating student, funding is now weighted towards universities that keep students through to graduation.

Now, Kasich, a Republican in his first year in office, is calling for turning the state’s public universities into “charter universities.” That designation would allow them to operate under fewer state regulations. It’s still unclear what that freedom would look like, but education officials have given the example of exempting state universities from rules requiring multiple contractors on building projects. That’s a regulation that tends to drive up the price of construction on campus.

The plan has a familiar ring to it. In Wisconsin, Republican Governor Scott Walker has proposed splitting off the state’s flagship public university in Madison from the rest of the University of Wisconsin system. The move to set up the school as a separate authority would give the University of Wisconsin-Madison more leeway in spending and setting tuition. The governor also proposed studying a similar split for the University of Wisconsin-Milwaukee. The UW system faces a $250 million cut in Walker’s proposed budget for the next two years, about half of that coming from the Madison campus.

In Louisiana, lawmakers approved legislation last year allowing higher ed institutions to raise tuition if they met certain requirements, such as higher graduation rates. Now, Republican Governor Bobby Jindal wants to combine some administrative functions and give schools more leeway in hiring, setting tuition and purchasing.

And in Oregon, state university officials are pitching a broad plan to finance the University of Oregon through state bonds and private donations. Supporters of the plan say it would protect the school from swings in state budgets and provide a more predictable funding stream. Critics say the plan could lead to more tuition increases. During a state Senate hearing on the idea last month, students showed up to protest wearing red tags on their shirts that said “Keep UO Public,” according to The Oregonian.

The tuition trade-off

While the share of state funding in university budgets has been declining for decades, the drop has become more pronounced during the recession, forcing price increases and intensifying talk of university flexibility. Many university officials, like Gee, have indicated a willingness to exchange reduced state aid for the ability to raise more revenue on their own.

But as long as the state appropriations keep flowing to schools, lawmakers are going to want to have some say in tuition rates, says David Breneman, a professor at the University of Virginia.

“Governors and legislators will put up with a certain amount of tuition increase,” he says. “But at some point they balk.”

Proposals to grant more autonomy to state universities are not new. In 2005, Virginia lawmakers granted the University of Virginia, Virginia Tech and the College of William and Mary more autonomy from the state. Routine administrative business such as purchasing or payroll no longer has to go through officials in Richmond. In return, the state required the universities to meet objectives on student access and affordability.

There is a concern, however, that granting state universities too much authority could jeopardize their original mission, to serve the state’s students. “There’s a sense of a broken contract here,” says Breneman. “There’s an emotional tide to this sort of thing. It’s almost like a divorce.”

In Ohio, Sara Kaminski, executive director of the Ohio Conference of the American Association of University Professors wrote an editorial in The Columbus Dispatch saying Kasich’s proposal would renege on the state’s commitment to providing an affordable education.

“In Ohio, this would make it even more difficult than it has already become for the average Ohio family to send children to college,” Kaminski wrote. “Students will either choose not to attend college or will graduate with an inordinate amount of debt — both of which will equate to less spending potential in our economy.”

— Contact David Harrison at dharrison@pewtrusts.org